Although Brazil has a large population and a growing upper middle class, at its current price level – prices as high as USD 30 to 40 (EUR 26 to 34.5) per kilogram have been observed at the supermarket chain Carrefour – shrimp is considered to be a luxury product.
In 2017 these high prices on the one hand, and the economic downturn on the other, resulted in a drop in demand for shrimp in Brazil. With signs of recovery in early 2018, some industry insiders are hopeful that this crisis will be over by the end of this year.
It is thought that by the end of 2018 demand for domestic shrimp could be driven up by lower prices due to better control of disease, increased production volumes and lower production costs. According to Seafood Brasil, a Brazilian industry magazine, the crisis in the Brazilian shrimp market was twofold: On the one hand, it was caused by a decrease in the purchasing power of consumers due to high inflation, and on the other by an increase in the price of shrimp in the supermarkets due to the high production costs of shrimp farming, and supermarkets’ high profit margins. Seafood Brasil reports that prices for all shrimp sizes have increased from 2016 to 2017 by 10 percent for smaller sizes and by as much as 40 percent for larger sizes.
With market demand under pressure, supermarkets have tried to maintain sales by, for example, offering more small-sized shrimp (100 count per kilogram and smaller) and smaller packages (200g or 250g packages). Restaurants have to use other strategies, as they cannot easily increase the prices on their menus, as this would deter customers. One interesting example of this, Seafood Brasil found, was that of a fast food restaurant chain that decreased the number of shrimp per dish, but started to offer an optional extra portion of 10 pieces of shrimp on its menu.
While the market has been under pressure, some industry insiders have a positive outlook for 2018 and predict an expansion of both the market and production. Seafood Brasil gives the example of a fast food restaurant chain that has rented its own farm to secure supply and limit costs. It also reveals that some existing producers have recently decided to expand their farming capacity. SeafoodSource reported that CP Thailand has invested in Camanor, Brazil’s only super-intensive shrimp producer, and aims to expand Camanor’s production capacity significantly. While investments in production capacity are picking up, some companies also aim for market expansion. Seafood Brasil reports on investments in processing capacity for frozen shrimp and about industry plans to also increase sales of frozen shrimp to small – and medium – sized retail chains throughout the country.
Another factor that was expected to drive prices down in 2018, and which could have ultimately increased sales volumes, was the arrival of cheaper Ecuadorian shrimp. Although there is a sizable informal market for shrimp in Brazil involving fresh-produce markets and local restaurants, frozen shrimp that is sold by retailers and larger food service companies is traded through formalized channels. The number of domestic suppliers of frozen shrimp is limited to three or four major players including Camanor, Compescal, and Potipora. These companies will be faced with increased competition if large volumes of cheaper Ecuadorian shrimp are to enter the market.
In March, ShrimpTails reported that after the Brazilian government lifted the ban on imports of Ecuadorian shrimp, shipments began at the start of 2018 and were expected to arrive on the market quickly. Sources in Ecuador now confirm that only four containers have been shipped to Brazil between January and April.
A few conclusions may be drawn from this current landscape. With domestic production on the increase, it is likely that prices will go down and volumes will go up. As long as Brazil’s economy will avert crisis, 2018 might turn out to be a good year for Brazilian consumers and producers. For Ecuadorian exporters, however, as the ban on imports is reintroduced, it is not clear yet how this year will turn out. With a strong lobby from Brazil’s domestic producers it is unlikely that the market will open up for other competitors anytime soon.
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